Sydney home prices drop; National housing market's growth conditions flat in October

Properties can be seen along the coastline in the Sydney suburb of Clovelly, Australia, July 19, 2015.
Reuters/David Gray

A national house price report has found that Sydney, Perth and Darwin are the only capital cities to see a drop in housing prices. But when it comes to the national housing market as a whole, growth conditions were flat this month, according to CoreLogic's home value index.

The index notes that the national market is losing momentum since its peak on November 2016. Tim Lawless, CoreLogic's head of research, said the slowdown in the pace of capital gains can be attributed mainly to tighter credit policies.

"Additionally, interest only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties,” Lawless said. He added that lenders have tightened servicing tests and lessened their appetite for riskier loans, and that lower price points and lifestyle opportunities appeal to buyers.

Lawless said that seeing Sydney join Perth and Darwin, where dwelling values have been dropping, is a “significant turn of events.” Sydney dwelling values dropped 0.6 percent in the August to October period. During the same period, Perth and Darwin both saw steeper falls in property values, down by 0.7 and 4.4 percent, respectively.

The report from CoreLogic also notes that Sydney dwelling values reached 74 percent since the growth cycle commenced. The Melbourne market rose 1.9 percent in the last three months.

Home prices across regional NSW are soaring higher compared to Sydney. They see values up 9.7 percent over the past year, led by the Newcastle and Lake Macquarie region.

Hobart was the fasted growing capital city. Its properties recorded quarterly growth of 3.3 percent and an annual increase of 12.7 percent. Sydney and Melbourne investors turn to Hobart's market where housing prices are lower than those in the country’s largest cities.

"Hobart is benefitting from renewed housing demand in the form of interstate migration particularly from Sydneysiders and Melbournites," Lawless said, according to ABC News. In comparison with other capital cities, Hobart's median dwelling price was the lowest at $396,393.

Adelaide ($430,303) and Darwin ($437,910) are the capitals with the next lowest median prices. Sydney's median price was the most costly at $905,917.

Melbourne ($710,420) and Canberra ($582,882) follow the list. Although Victoria's record breaking migration rate drives Melbourne's growth, Lawless warned that home prices in Melbourne are now rising at their slowest quarterly pace since mid-2016.